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Buying a house and figuring out a budget? No idea where to begin..
Ok so I am the very very very beginning stages of looking into buying a house. Anyway my first step is to figure out a budget. In order to figure out a budget I need to know the cost of living then minus it from my yearly earnings to see what is left over. Once I do that I can determine my monthly mortgage limit and start looking into rates and start looking in the proper ranges.
I live on Long Island in NY and plan to stay here. Probably somewhere in Nassau county. This is a list of bills that I could come up with and started looking for average costs but somehow it seems very wrong.
Mortgage - $12k
Property Tax - $9000/Year
Water/Sewage - $ 358/Year
Electricity - $3000/Year
Oil - $ 700/Year
Gas - $1100/Year
Cable - $ 960/Year
Internet - $ 720/Year
Garbage - $ 120-$480/Year
Cell - $1800/Year
Car Loan - $6000/Year
Gym - $ 550/Year
Gas - $6900/Year
Groceries - $5200/Year
Liability Insurance - $ 700/Year
Homeowners Insurance - $ 800/Year
Health Insurance - $ 900-$2200/Year
Car Insurance - $1400/Year
Household Purchases - ???
Home Inspection - $200-$500
Retirement - $2520/Year
Entertainment - $2400/Year
Savings - $1200/Year
Credit Cards - $2400/Year
Auto repair - $2000/Year
Maintenance - $3000/Year
Repairs - $3000/Year
HOA fees - $200-$900/Year
Mortgage Insurance - $3000/Year
Ok now if these look very wrong what would be more accurate? I am 26 and have no experience with this kind of thing and I dont have anyone experienced that can help me so hopefully someone here can help me.
Thank you in advance
Re: Buying a house and figuring out a budget? No idea where to begin..
It's MUCH easier if you do it monthly. You know what you take home every month now in pay and you know how much you pay in rent now. So the question is simply whether and how much you think you could go up per month and still be comfortable. The answer is a rough idea of a good monthly payment for you guys.
To figure out how that corresponds to a house, you'll need to account for property taxes and homeowner's insurance. Check out some listings and search the info down in the bottom for tax prices. Once you know the taxes, go to BankRate and play with the calculator, being sure to add in both the property tax number and an amount for homeowner's insurance.
This is NOT the same as talking to a mortgage broker, but it'll at least tell you whether you need to be thinking $300k or $600k. When you get serious, talk to a broker about getting pre-qualified (no credit check, just numbers you self-report) and pre-approved (they pull your credit and use the numbers on documentation you provide).
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For a HCOL area assume 30-35% of your TAKEHOME pay as a safe amount for housing (that is mortgage+PMI+insurance+taxes+utilities+HOA if applicable.)
Track all your spending each month - every dollar for a few months. Categorize. See what is left to apply elsewhere. Don't forget savings and have a good emergency fund in place prior to buying.
Pay off your credit cards monthly rather than carring a balance.
Start by tracking your actual spending for no less than 3 months. You are probably spending more than you think you are in some categories, and especially on misc things. I find mint.com useful for this, since anything I buy with my debit or credit card gets entered automatically, and I only have to type in things I pay cash for.
You can also look at your annual take home income, minus the amount you've managed to save in the past year, and that will give you a good idea of how much you spend now.
When DH and I did both of these the first time, we discovered we were spending $800/month more than we ever would have guessed. For comparison, we thought we were spending under $2000/month total. So, yeah, ouch! But at least we figured it out before committing to a mortgage we couldn't really afford.
Where in Nassau are you looking and where do you live now?
I grew up on Long Island and just moved off the Island last August.
I'm not certain if school districts are something you care about, what your budget and down payment are, but $12K/year and $9K in property taxes sounds very low.
I was in Suffolk County and my taxes at their highest point were $17K and then eventually re-assessed to $14K after the market crashed.
As others suggested, assuming you are renting, you can start there. Also think about what you have saved, what you could afford to spend on a mortgage and still have money left over for other costs, such as electric..etc and also still have money to save.
I'd also suggest looking at zillow and other sites and seeing what homes are in the area, size you might want and what that costs - most listings will give you taxes as well so you can start getting some budget numbers together.
Then think about how much space you really need. I think the mistake many make is buying today what they think they might need 20 years from now. We bought too big thinking we'd have kids and that hasn't worked out. It's been fine and we like the house, but we could have been putting more money away if we had gone a bit smaller.
Also, consider renting too. I think these days with interest rates where they are, buying does make more sense, but I also think about the fact we could have stayed where we were for about $1200 less than we pay now and not have to do any maintenance or anything else. In the 10 years we've owned, we could have saved $144,000 - probably closer to $200,000 with renovations we've done.
Owning does have its benefits though in that things can be exactly the way you want them, but it's not for everyone and like many think, its not necessarily a way to save money
Specifically on LI, it's likely that your taxes and homeowners insurance will be higher than that. Additionally, many areas need flood insurance which can be thousands more per year.
You might want to take a look at Long Island Housing Partnership: http://www.lihp.org/
They specifically focus on "affordable" housing on LI and helping first time home buyers prepare. They'll probably be able to give you the best and least biased information since they're not trying to sell you everything. If you make below a certain percentage of the median income there might also be down payment and closing cost assistance programs that you qualify for.
These are the times I am thankful I live in a LCOL area. $9,000 a year for property taxes would make me pass out. But even in my area, $1,000 a month mortgage is very low. How much are you wanting to spend on a house and how much can you put down?
My husband and I just bought out first house in Suffolk County. It is hard to find houses that are in good condition for less than $400K and even harder to do so in Nassau County. Takes will range between $11k-17K for houses in the mid to upper $400Ks. Like a previous poster mentioned, insurance can also be a pain to find as many of the popular insurance companies will not even insurance homes on Long Island and most of the Island requires flood insurance. Luckily, we bought in Nesconset which is far enough away from either shore to not require the flood insurance.
Another major thing to consider is school district. Taxes will be much higher in the better school districts, but you will have less of a problem if you ever want to sell if you buy in one of the better districts. If you browse the Newsday website you can find a lot of information on school districts on the Island.